Jobs

Short-term Technical Assistance: Supporting FMFB-A in Improving SME Lending Structures

Application Deadline: 1 August, 2021
Question Deadline: 23 July, 2021

Institutional Background

The ACGF – Afghan Credit Guarantee Foundation (“ACGF“) was established in September 2014 by the German Federal Ministry for Economic Cooperation and Development (“BMZ”) and DEG – Deutsche Investitions- und Entwicklungsgesellschaft mbH (“DEG”) with approval and support from the Government of the Islamic Republic of Afghanistan and from the Central Bank of Afghanistan as well as from the Governments of both the United States of America and the Federal Republic of Germany.

ACGF has received all financial resources of a previous guarantee project managed by DEG, including its entire outstanding guarantee portfolio, and has been managing all operations since the beginning of 2015. ACGF provides partial guarantees to Afghan financial institutions which provide credit to local micro, small and medium enterprises (“MSMEs”). It also provides technical assistance (“TA”) to Afghan financial and other institutions. ACGF is supported by its 100 percent subsidiary SME Client Support Afghanistan LLC (“SCSA”), a Kabul-based financial consulting company focused on providing ancillary services to ACGF in the areas of credit guarantee business including TA for Afghan PIs on behalf of ACGF.

ACGF’s mandate is to contribute to strengthening the emerging financial sector and to developing private-sector capacity in Afghanistan, thus, to support the creation of employment and income. ACGF facilitates access to finance for Afghan MSMEs. ACGF’s objectives are achieved mainly by sharing credit risk with the Afghan partner financial institutions (“PIs”) by providing credit guarantees for MSMEs and by providing comprehensive technical assistance (“TA”, training, coaching, product development, risk management improvements, etc.).

As per the end of March 2021, ACGF (including its legal predecessor) has issued approx. 5,671 guarantees to support a combined disbursement of USD 253m in MSME loans. The market share of ACGF was approx. 50 percent of all MSME loans outstanding by banks and MFIs in Afghanistan. The average net loss rate since inception is 1.7% p.a. ACGF estimates a retention of close to 35,500 employees of the guaranteed businesses and creation of approx. 13,000 additional jobs.

Project Description

FMFB is planning to expand, strengthen and upscale its operations to SME lending in urban areas, where branches so far are only focused on microfinance. As such, this project foresees a market analysis to identify the potential for upscaling, as well as a technical advisory for the set-up of new structures. The consultant will additionally review existing policies and procedures for small loans (AFN 500,001 – 5,000,000).

The project is split into three separate parts A, B, and C, whereas Part A refers to the Expansion of SME Lending in Urban Areas, Part B includes the Improvement of Policy and Procedures for the Smaller SME Loan Segment, and Part C encompasses the provision of training to FMFB staff and Management on the implemented improvements.

Part A: In a preparatory phase, an external Service Provider will assess existing structures at FMFB that are relevant for the assignment as well as the internal potential of the existing micro-finance branches’ portfolio with respect to microfinance borrowers that have the potential to soon become SME borrowers. Then, the most relevant markets for a potential expansion of operations in the geographical areas with existing microfinance branches will be identified through a focused market analysis. Afterwards, the Service Provider will analyse in detail the MSME market in the areas in which FMFB plans to expand its branches. In particular, the Service Provider shall analyse and assess the current MSME landscape in these areas, focusing on the main sectors MSMEs are active in, the identification of the market size, and the respective financing needs. The analysis of the latter shall especially be focussed on the needs of MSMEs and clients at the upper end of the microfinance segment. Based on the results, the Service Provider develops recommendations for the loan products with respective loan conditions offered for each region. The Service Provider then encompasses and translates all findings into recommendations for potential lending expansion plans. Based on discussions with the Senior Management of FMFB, the Service Provider then refines the recommendations to a Lending Expansion Strategy.[1] 

In a next phase, the Service Provider develops recommendations on the organizational setup of the branches. A special focus shall thereby be laid on extending the loan officer’s responsibilities to cover more than only one loan size (such as Micro or SME) and thus implementing ULO concepts in the branches. In cooperation with FMFB’s management, the organizational structure for the respective branches will be defined, clearly indicating recruiting needs, staff responsibilities and reporting procedures/needs and lines with the headquarter, the financing products to be offered as well as updated and extended procedures, tools and /or templates where necessary. The Service Provider will then conduct a two-day workshop for the branch management team involved in credit decisions (branch managers and team leaders) of the extended branches on the new responsibilities, organizational set-ups, lending targets[2], and reporting lines. Moreover, a one-day workshop for FMFB Senior Management on the former will be conducted.

Part B: At first, the Service Provider analyses the existing gaps in current policies, procedures, tools, and templates for small loans by reviewing all relevant documents, the relevant regulation as well as interviewing FMFB’s staff. Besides, the Service Provider assesses the current (small) loan portfolio with respect to the most prevalent business segments and provides recommendations on whether and how FMFB can tailor the existing structures to better serve these segments.

Afterwards, the Service Provider proceeds with updating the policies, procedures, methodologies, and tools in accordance with the gaps analysis.

Part C: Finally, the Service Provider will develop two separate training packages for the loan officers on (a) the ULO concept and the new organizational structures due to branch extension and (b) the updated policies, procedures, tools, and templates for small loans. These training packages shall cover two weeks of training by the Service Provider and guiding material for on-site coaching by SCSA staff, which will cover 3 days of training at each branch over the course of four weeks.[3] The implementation of the training packages both by the Service Provider and SCSA will be subject to a further approval and go-ahead of ACGF and FMFB after completion of Part A & B, due to the possible dependence on newly hired staff.

The project will be implemented over the course of 7 months. 

[1] Please note that this Lending Expansion Strategy shall be focussed on, but not strictly limited to the SME segment but also consider the expansion in the microfinance market, there especially focussing on the upper end of the microfinance segment.

[2] The Service Provider is expected to develop lending targets for the respective branch managers based on the market assessment of Phase 2. These suggested lending targets will then be further discussed and refined in coordination with FMFB Senior Management.

[3] The implementation of on-site coaching is dependent on the security situation in the locations of the respective branches. The final timeline and scope of coaching will be agreed between SCSA and FMFB in the course of the project.

Kindly submit all questions by 23 July, 2021 to Dana Al Sunna, Technical Assistance Office, at d.alsunna@acgf.de.

Proposals may be submitted via email until the deadline of 1 August, 2021 to Verena Kauth, Technical Assistance Officer, at v.kauth@acgf.de.